Government shutdown to have impact on U.S. dairy market

Editors's note: The following information is provided by HighGround Dairy, a division of HighGround Trading Group in Chicago.

As the federal government shuttered its doors on Tuesday, many in the dairy industry were left unprepared for the lack of data that comes along with a USDA closure.

Remaining on the job will include USDA dairy graders, inspectors as well as federal milk marketing administrators as their funding is provided by the industry and not through an act of Congress.

But employees of the National Agricultural Statistics Service (NASS), the Economic Research Service (ERS) and the Agricultural Marketing Service (AMS) divisions of USDA have been furloughed, meaning that all data reported by these agencies will be on hold until they are properly funded by Congress.

This includes all data and research USDA’s Dairy Market News provides on a daily, weekly, bi-weekly and monthly basis. It will likely have a significant impact on manufacturers that use average midpoint indices as a baseline to sell certain products to their customers.

Also being withheld from the industry includes monthly reports such as Dairy Products (was scheduled for this Thursday release), Milk Production, Cold Storage, Livestock, Dairy & Poultry, World Ag/Supply/Demand Estimates, Ag Prices, etc.

Finally, it also means USDA will not publish the weekly National Dairy Products Sales Report (NDPSR) that provides the industry with cheese, butter, nonfat dry milk and dry whey sales prices and volumes which are used to calculate Class prices in the Federal Milk Marketing Order (FMMO) as well as settlements for Chicago Mercantile Exchange (CME) futures.

Sources at the USDA informed HighGround on Tuesday that it would be invoking a special rule taken from the Code of Federal Regulations (7 CFR §1000.54) titled “Equivalent Price”.

This rule states, “If for any reason a price or pricing constituent required for computing the prices described in §1000.50 (Class prices, component prices, and advanced pricing) is not available, the market administrator shall use a price or pricing constituent determined by the Deputy Administrator, Dairy Programs, Agricultural Marketing Service, to be equivalent to the price or pricing constituent that is required."

HighGround confirmed with a representative from the Upper Midwest FMMO that they were anticipating September prices to be released to them by USDA Wednesday afternoon and should be posted to their website (http://www.fmma30.com) by approximately 3PM CST.